Currently, several Internet-based money transfer services are in operation. Several of these services do not accept a payment card as a source of funds because of concerns about fraud and chargebacks. The ones that do accept payment cards generally employ one of the following authentication methods; these methods can be perceived as less than desirable.
Some services require paper-based registration where the cardholder is required to send a copy of various documents (e.g., passport, social security card, etc.) to the service by mail or facsimile so that the consumer can be authenticated. Others use an Address Verification Service (“AVS”)—the cardholder is required to submit his billing address that is then verified by the payment card issuer using the AVS while authorizing the transaction. As address formats and spellings might vary, this AVS method is often inexact and inconclusive. Also, billing address data is often in the public domain and could be easily available to criminals. Other money transfer services employ a method in which token funds of a random value are credited to or debited from a cardholder's payment card or bank account. The cardholder is then required to read this random entry from his or her account statement, return to an Internet web site, and key in the same. One other technique involves inserting a random number string (usually four digits) in the merchant name or city field and also posting to the cardholder's account statement a small dollar purchase transaction. Cardholders are then required to read this random string from their statement, return to an Internet site, and key in this string.
These techniques have a number of disadvantages. For one, it is inconvenient for the cardholder because of one or more of these reasons: a) physical verification of documents is required; b) inexact and inconclusive verification results; and c) a significant time lag exists between the cardholder's first visit to the money transfer web site and the next visit to complete the transaction. High consumer attrition results from these inconveniences. These techniques are also more easily prone to fraud and do not constitute the strong authentication required for mitigating risk of fraudulent transactions and resolving cardholder repudiation (i.e., “I didn't make this transaction.”) type of disputes.
A bank might choose to trust a cardholder and deliver funds to a recipient without requiring the cardholder to go through an onerous registration and authentication process, but this approach is likely to entail an unacceptable level of risk to the bank. Even once a cardholder is authenticated using some type of registration process a bank might still delay delivery of funds to a recipient until the funds actually arrive at the bank. This delay can often be two days or more and is inconvenient for the recipient.
Accordingly, there is a growing need for a quick, convenient and secure money transfer service that provides for secure authentication of a cardholder in a convenient manner and allows a recipient to receive funds immediately while providing an acceptable level of risk to a bank.